Happy New Year!

A drone war is brewing in the United States. The Federal Communications Commission has banned the import and sale of all new foreign-made drone models and critical components, a move that effectively blocks future sales by Chinese drone makers — including market leader DJI — in the United States.

This matters because the U.S. has become highly dependent on Chinese drones. DJI alone controls roughly 70% of the global market, with its devices widely used across law enforcement, emergency services, agriculture, construction, and filmmaking.

Let’s dive into today’s edition.

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Rival Class I railroads have formally challenged Union Pacific and Norfolk Southern’s proposed merger, arguing that the application submitted to the Surface Transportation Board is incomplete and fails to meet regulatory requirements

Rival Power: BNSF Railway, Canadian National Railway, Canadian Pacific Kansas City, and CSX argue that the merger application lacks critical data required to properly evaluate competitive dynamics, market concentration, and network-level impacts.

At the center of the dispute is the railroads’ claim that the merger would divert more than 2 million truckloads of freight annually to rail. Competitors say the analysis relies on third-party modeling without disclosing underlying datasets, including truck flow and pricing information. They argue this violates major merger rules and prevents independent evaluation of the proposal’s public benefits.

The U.S. government has granted Taiwan Semiconductor Manufacturing Company (TSMC) an annual license to import U.S.-made chipmaking equipment into its Nanjing facility in China, ensuring uninterrupted production and deliveries. Similar permits were also issued to Samsung Electronics and SK Hynix after earlier exemptions expired at year-end.

What’s Happening? The approval replaces the companies’ previous “validated end-user” status under U.S. export controls intended to limit China’s access to advanced chip technology. TSMC said the license allows U.S.-controlled equipment to be supplied without case-by-case approvals.

The Big Picture: TSMC’s Nanjing plant produces mature-node chips, including 16-nanometer semiconductors, and accounts for a small share of the company’s revenue, underscoring that the license does not cover its most advanced manufacturing technologies.

China will impose new safeguard measures on beef imports starting January 1, including a 55% tariff on shipments exceeding quota limits from key suppliers such as Brazil, Australia, and the United States.

The Ministry of Commerce set the 2026 import quota at 2.7 million metric tons, broadly in line with recent import levels but below shipments recorded by major exporters in the first 11 months of 2025. The measures will remain in place for three years, with quota levels rising gradually each year.

What’s the Beef: Beijing said a surge in imported beef has harmed domestic cattle producers and contributed to declining profitability across the sector. Imports fell slightly in 2025, but analysts expect a sharper decline in 2026 as the tariffs take effect.

Affected Parties: Brazil, China’s largest supplier, is most affected, with industry groups warning of potential export revenue losses of up to $3 billion next year. Australian beef shipments to China had surged in 2025, partly at the expense of U.S. exporters amid ongoing trade tensions.

Tesla’s in-house 4680 battery program has suffered a major setback after South Korean supplier L&F cut the value of its supply agreement from $2.9 billion to just $7,386, signaling a near-total collapse in demand. The materials were meant to support Tesla’s high-profile 4680 cells, now used only in the Cybertruck.

The agreement, signed in 2023, was meant to supply high-nickel cathode materials for Tesla’s next-generation batteries through 2025.

Free Fall: The sharp reduction reflects weaker-than-expected demand for Tesla’s 4680 cells, which are currently used mainly in the Cybertruck. Despite a claimed annual production capacity of 250,000 units, the vehicle is selling at a fraction of that pace. Slowing EV demand, production challenges tied to the 4680 manufacturing process, and disappointing Cybertruck sales have all reduced Tesla’s need for battery materials.

Broader Outlook: The write-down underscores broader strain across the global battery sector, as automakers scale back EV plans amid policy uncertainty and softening demand, forcing suppliers to cancel orders, exit joint ventures, and take multibillion-dollar revenue hits.

Manufacturing activity across Asia rebounded toward the end of 2025, led by export-heavy economies such as Taiwan and South Korea, easing fears that U.S. tariffs would derail global demand. New data from S&P Global showed factory output and new orders returning to expansion territory in several key economies.

Number Game: Taiwan’s purchasing managers’ index rose to 50.9 in December, while South Korea’s climbed to 50.1 — both crossing the 50 mark that separates growth from contraction for the first time in months.

Vietnam posted the strongest reading in the region, while the Philippines, Malaysia, and Indonesia also reported expanding factory activity, supported by improving export demand and consumer spending.

The White House has delayed planned tariff increases on furniture, kitchen cabinets, and vanities, keeping the current 25% tariff in place until at least January 1, 2027. The higher rates — which were set to rise to 30% on upholstered furniture and 50% on cabinets and vanities — were scheduled to take effect this year.

Officials said the decision reflects “productive negotiations” with trade partners on trade reciprocity and national security concerns tied to wood product imports. The pause offers temporary relief to retailers and importers that rely heavily on overseas manufacturing, particularly from Asia.

The move comes as furniture prices are already rising, with living room, kitchen, and dining furniture up 4.6% year over year.

The U.S. government has awarded Lattice Materials $18.5 million to expand domestic production of germanium and silicon, two critical minerals used in advanced defense and optical systems. The funding was issued under the Defense Production Act.

Homegrown Plans: Lattice Materials plans to use the funds to increase production of optical-grade crystals and develop processes to recover germanium from recycled sources. The effort is part of a broader push by the U.S. government to rebuild domestic critical mineral supply chains that support defense, aerospace, and high-tech manufacturing.

Why Now? The investment comes as China tightens export controls on germanium, which is essential for military sensors, missile guidance systems, and infrared optics. U.S. officials say boosting domestic capacity is necessary to protect national security and reduce supply chain vulnerabilities exposed by geopolitical tensions.

The U.S. Commerce Department is set to sharply scale back tariffs planned for more than a dozen Italian pasta makers. While most European Union goods already face tariffs of at least 15%, the pasta-specific duties proposed in October would have pushed the total rate to as high as 107%.

Under the revised plan, the additional levies would instead bring total tariffs into a lower range of roughly 24% to 29%.

Backstory: The proposed tariffs stem from an antidumping complaint filed last July with the U.S. Commerce Department. Two Midwestern companies, 8th Avenue Food & Provisions and Winland Foods, alleged that Italian producers were selling pasta in the U.S. at unfairly low prices.

Lucrative Market: Italy exported more than €4 billion ($4.7 billion) worth of pasta in 2024, according to the national statistics agency ISTAT. Nearly $800 million of those exports went to the United States, making it one of the industry’s most important markets.

Consumer electronics prices could rise by up to 20% as AI-driven data centre expansion strains global chip supply, according to manufacturers and analysts. Demand for high-bandwidth memory used in AI servers is crowding out semiconductors needed for smartphones, PCs, appliances, and cars.

Supply Crunch: Companies including Dell, Lenovo, Raspberry Pi, and Xiaomi have warned of mounting cost pressures, with DRAM prices surging and shortages spreading across the supply chain.

Samsung and SK Hynix, which control more than 70% of the global DRAM market, say orders for next year already exceed capacity, prompting sharp price hikes.

Future Outlook: With Big Tech expected to spend over $600 billion on AI infrastructure next year and new chip capacity years away, manufacturers face a stark choice: raise prices or absorb margin pain. Analysts warn supply tightness could persist until at least 2027.

China has implemented stricter export controls on silver, effective January 1, 2026, shifting the metal from a commodity with minimal oversight to one subject to a state export-licensing regime. Under the new rules, companies must be on a government-approved list and secure licenses to ship silver abroad — a system similar to recent controls on rare earth elements.

Key Details: Beijing’s Ministry of Commerce has designated 44 companies authorized to export silver in 2026-2027, with additional controls also covering tungsten and antimony, reinforcing China’s grip over key strategic metals used across electronics, clean energy, defense, and advanced manufacturing supply chains.

Price Rise: The move has contributed to surging silver prices, with spot prices climbing sharply and reaching record highs in late 2025 amid reduced supply and heightened geopolitical risk. In fact, silver’s price jumped significantly, turning it into one of the most valuable traded assets this year.